If your organization disappeared overnight, would it be missed? For hospital-based health systems that provide essential medical care to lower-income patients in urban areas in the United States, the answer is a resounding yes. These organizations not only care for marginalized populations, they also train new generations of physicians, nurses, and allied health professionals.
Such health systems are stabilizing, sustaining anchors — they are crucial to U.S. health care in general, the well-being of their surrounding communities, and the interests of local businesses, whose employees depend on their care.
Yet, enormous financial and operational forces jeopardize the survival of these institutions. To sustain U.S. health care for the long term, businesses and governments as well as these health systems themselves must be frank about the challenges — and must innovate deftly to find solutions that can actually be implemented.
Why Are Anchor Health Systems in Jeopardy?
Health systems that care for lower income, often uninsured or underinsured patients are usually called “safety net” institutions. We instead use the term “anchor health systems,” because the mission of these typically hospital-based institutions, whether public or nonprofit, is much broader than care for the indigent.
They frequently provide vital, specialized services, such as neonatal ICU care, trauma care, burn treatment, and intensive psychiatric treatment, that people cannot get anywhere else. They deliver comprehensive services across inpatient and outpatient networks. They play a leading role during community health crises, such as pandemics, floods, fires, mass accidents, and shootings. And they often run medical schools, nursing schools, and other training programs for the nation’s overstretched health care workforce. Located usually in major cities, these systems are training high cadres of caregivers who reflect the ethnic and racial diversity of these communities, better equipping them to provide culturally-aligned care for these local vulnerable populations.
Anchor health systems attract a lower proportion of commercially insured patients and, typically have much lower operating incomes compared with their metropolitan-area counterparts that serve more affluent areas. It’s an unsustainable reality — as data from America’s Essential Hospitals, a Washington, D.C.-based association representing more than 300 anchor health systems, makes clear. The association’s member health systems operate on margins far below that of other hospitals, given their payer mix and patient profile; provide more than 24% of uncompensated care among U.S. acute-care hospitals; account for nearly one-third of the nation’s level 1 trauma centers; and, on average, train more than three times as many doctors as other U.S. teaching hospitals. In 2021, during the pandemic, anchor hospitals had a negative 8.6% margin compared to a negative 1.4% margin for the overall industry, highlighting their fiscal frailty.
Consider Harris Health System in the Houston area’s Harris County, a jurisdiction with a poverty rate of 16.4% in 2022. Harris Health operates two anchor hospitals, Ben Taub and Lyndon B. Johnson, along with more than 30 clinics, and provides care to nearly 300,000 patients annually regardless of insurance status. About 46% percent of Harris Health patients are uninsured; only about 20% have commercial insurance or other funding; and the patient population is diverse: more than 50% Hispanic/Latino, 24% African American, 14% Caucasian, and 9% Asian and others.
Imagine the potentially devastating ripple effects if Harris Health and other anchor systems closed their doors — not just for the patients and complex regions they serve but also for the entire U.S. medical education system. Ensuring that anchor health systems can weather their stiff financial and operational headwinds demands an all-hands-on-deck approach from the health systems themselves, business leaders, and government.
What Anchor Health Systems Must Do
No innovative approach to helping anchor health systems will succeed if the health systems themselves don’t reform their own approaches to delivering their essential care and services. Here’s what they must do.
Achieve efficiencies.
Anchor systems cannot afford the waste that plagues U.S. health care generally. They must strengthen their value proposition by simultaneously improving quality and reducing costs: spending on what matters and eliminating activities that provide insufficient benefit to justify the expense. Some anchor health systems are demonstrating what is possible.
Harris Health has substantially reduced the number of emergency department (ED) visits from frequent multi-visit patients (MVPs) by identifying the underlying drivers of double-digit ED visits annually (such as housing, behavioral, or substance-use-disorder issues) and empowering its own community health staff to work with patients to find appropriate assistance to resolve those drivers. Harris Health also offers a call service, staffed by registered nurses, to help patients determine whether they even need to visit the ED.
Zuckerberg San Francisco General Hospital (ZSFGH), in California, used machine learning to develop protocols that are embedded in its electronic health record (EHR) system for treating patients with heart failure. They inform treatment (e.g., recommended medications), identify what patients need to aid their recovery, and reduce rates of hospital readmission. ZSFGH created an EHR dashboard that offers real-time data on patients’ social and clinical needs, enabling staff to connect patients with needed community services. In 2022, this initiative contributed to a more than 10% reduction in the 30-day readmission rate, dramatically reversing the historically higher rates of Black patients compared with other patients. Improving outcomes and reducing costs in heart failure are especially meaningful, given that more than 75% of ZSFGH’s patients identify as minorities and that the hospital cares for more people with heart failure than any other San Francisco hospital.
Parkland Health, the county hospital for Dallas, Texas, has been a pioneer in using predictive analysis to improve quality. For instance, its Parkland Center for Clinical Innovation developed a computer model to assess the risk of illness in children with asthma in six targeted Dallas zip codes. That model used EHR data to flag children at risk of deterioration and to prompt primary care interventions and home visits. Costly asthma-related inpatient admissions were cut by half for 93,000 children.
Enlist capable partners.
Anchor health systems, as essential community-service entities, should seek to pool key resources by collaborating creatively with appropriate community partners. When health systems work with the community, not just for the community, they can accomplish so much more.
A case in point is Henry Ford Health, a Detroit-based anchor. It has launched a $2.5 billion collaboration with the National Basketball Association’s Detroit Pistons and with Michigan State University to build, over a 10-year period, a new hospital (across the street from its original 100-plus year-old hospital), a medical research building, and residential and recreational facilities in the surrounding downtown area. The net result will be better health care access; modern, state-of-the-art facilities; and an economic multiplier as housing, hotels, retail stores, and other amenities attract leisure and commerce visitors, not just hospital visits. The commercial part of the development (which is being led by Detroit Pistons owner Tom Gores) is expected to have more than 650 residential units and more than 85,000 square feet of green space (including, of course, basketball courts).
In Minneapolis, anchor hospital Hennepin Medical Center partnered with the local Meals on Wheels America affiliate to deliver food prepared in the hospital cafeteria at no cost to at-home patients in need — while also starting a rooftop garden that is open to patients, staff, and the community at large. This “Sky Farm” includes about 5,000 square feet of available growing space and supplies thousands of pounds of produce per year to the community.
Scale up strategically.
Some anchor hospitals have improved their position by merging with other mission-aligned health systems. Done carefully, consolidation can strengthen these institutions by giving them greater influence in negotiating with payers and suppliers and enabling them to share best operational practices.
In 2017, two South Carolina anchor systems, Greenville Health and Palmetto Health, merged and, in 2019, rebranded the new entity as Prisma Health. The merger created the largest health system in the state, with 18 acute and specialty hospitals and more than 300 clinical sites covering 21 counties. In 2022, Prisma further extended its reach by combining two separate physician groups, with more than 5,200 employed and independent clinicians, into the inVio Health Network. Prisma now has far greater scale, bargaining clout, and combined clinical expertise, better positioning it to compete, serve, and remain solvent than the two separate entities likely would have been without the merger.
Create centers of excellence.
Anchor health systems can generate new lines of revenue by becoming the clinical option of choice in their market for specific medical conditions. Building centers of excellence enables them to attract patients across the income spectrum, including the privately insured. The Massey Cancer Center at Virginia Commonwealth University, a public institution in Richmond, Virginia, attracts patients from across the region while providing the services of a major cancer center to that city’s vulnerable populations. As one of 56 National Cancer Institute-designated comprehensive cancer centers, Massey has carefully defined its catchment area of over 4 million people, which is more than 40% racial and ethnic minority and over half rural; cancer rates are high in this area, especially for Black residents.
Jackson Health serves a large population in and around Dade County, Florida, and has built a large heart institute that now serves patients who otherwise may not have used the local public hospital system. The institute offers a full range of high-tech cardiac services, including heart transplantation, complex vascular and valve procedures, and clinical research studies.
What the Business Community Must Do
Companies have a big stake in the viability of anchor health systems. Beyond keeping local companies’ existing employees healthy and providing them with highly specialized, often unique, clinical services, anchor health systems are, in their own right, major contributors to the economies of their communities. They are often among the largest employers, and their staffs include highly trained and compensated knowledge workers. Anchors that are academic medical centers provide health sciences education, procure federal research funding, and stimulate the formation of new life sciences and biotechnology industries in the community and region.
For example, the UAB Health System in Birmingham, Alabama, the major local provider of health care to indigent patients, employs more than 4,300 researchers and currently is building large genomics and biomedical research towers. In 2020, the MUSC health system in Charleston, South Carolina, estimated that its annual economic impact on the Charleston region was $4.5 billion, including the creation of nearly 31,000 jobs at income levels much higher than the statewide average. Over half the jobs supported by MUSC, directly or indirectly, are considered to be part of the knowledge economy.
Here’s what local business communities can do to support their anchor health systems.
Provide financial backing.
Substantive financial support from businesses not only can mean the difference between achieving solvency or closing the doors, it can also revitalize the momentum and reputation of institutions that barely make ends meet.
The Atlanta business community’s support of Grady Hospital is a model for others. Grady has long shouldered the responsibility of caring for the city’s poor residents. In 2007, the Greater Grady Task Force, led by the Metro Atlanta Chamber of Commerce, formed with the goal of heading off Grady’s financial failure. In 2008 the Robert W. Woodruff Foundation, whose board consisted of Atlanta corporate leaders, donated $220 million that enabled Grady to restructure into a private, nonprofit system. (Robert W. Woodruff led the Atlanta-based Coca-Cola Company for more than 60 years.) Given the close affiliation between Emory University Hospital and Grady (where many Emory medical residents are trained), this support of Grady helped ensure the success of both health systems, key contributors to Atlanta’s development as a major center for health care and public health innovation.
Pursue community support.
Business and other community leaders are especially well suited to energize support for anchor institutions because the organizations they represent depend on them, they are known in the community, and they are likely to have access to local politicians. These community leaders often hold board positions on influential business, cultural, and other local associations, giving them an opportunity to advocate for an anchor health system.
A good example is the Houston community’s support for a $2.5 billion bond that Harris County voters approved in November 2023 to help Harris Health care for the growing population it serves. The funding will be used to build a new level 1 trauma center and anchor hospital on the LBJ campus, extend and improve the existing Ben Taub anchor hospital, add more clinics and renovate existing ones, and renovate the original LBJ facility to provide outpatient and mental health care. Harris Health’s CEO, Esmaeil Porsa, started galvanizing broad support for the bond several years prior to the actual vote. Business, medical, and nonprofit organization leaders from groups such as the Greater Houston Partnership, the Houston Region Business Coalition, the Greater Women’s Chamber of Commerce, and the Houston Medical Center, were highly engaged in promoting passage of the bond package.
Similarly, community leaders in Phoenix supported a Maricopa County referendum to fund construction and renovation of needed facilities, including a new hospital, for Valleywise Health. In 2012, Valleywise’s then-CEO, Betsey Bayless, formed a “Citizens Bond Advisory Committee” of 16 community leaders and tasked it with evaluating the capital needs of Valleywise for the next 20 to 30 years. The committee’s assessment called for $1 billion in capital expenditures. Valleywise’s board then formed a bond campaign committee with broad community representation, and the health system and its new CEO Steve Purves spearheaded a successful bond issue ballot measure in 2014. Valleywise used the billion-dollar funding to build new clinics and a surgery center; expand and renovate existing clinics; buy a closed hospital facility, gut the building, and reconstruct it as a behavioral health center; and construct the new hospital, which will open in April 2024.
What Governments Must Do
Anchor health systems depend heavily on government support. But governments currently don’t adequately compensate them for the complex mix of patients who often are in poor health that they serve and the costly services, such as burn units, that they provide. These measures are needed to address that deficiency.
Fund adequately and strategically.
Medicare and Medicaid pay far less for care than commercial payers in the private market. Therefore, health systems caring for a larger pool of patients covered by public payers have a considerable disadvantage relative to institutions that serve more patients with private insurance, unless government fills the gap. Policymakers at all government levels must ensure that anchor systems have adequate resources.
Federal financial support comes from several programs, including the Medicaid Disproportionate Share Hospital program, which provided close to $20 billion in federal and matching state funding to many hospitals in 2021. This program was dramatically reduced under the Affordable Care Act, but the cuts have been delayed repeatedly through last-minute congressional action. Without these funds, numerous hospitals would soon be unsustainable. As a remedy, the federal government must consider providing stable, predictable, adequate funding to support these health systems. Specifically, Congress should permanently restore these funds and ensure that federal resources are carefully targeted to these institutions.
City and/or county governments must also do their part to provide equitable funding for anchor institutions. They should recognize the value of specialized services provided by these hospitals that are critical to the entire community (e.g., mental health and burn care) as well as the value of services delivered to specific populations, such as prisoners in the correctional system.
To best target limited resources, government must do a better job of defining what counts as an anchor health system. During the height of the Covid-19 pandemic, anchor health systems urgently needed funding, but identifying exactly which institutions should get monies led to considerable discussion and debate. A first round of funding missed many anchor hospitals and was quickly followed by a second round using different criteria. Some anchors like Valleywise were missed in both cycles.
Creating a common, statutory definition of anchor hospitals would prevent this from happening again. It would ensure that resources go to the right places, not merely to those that clamor loudly. U.S. policymakers have created precise definitions and concomitant financial support for rural hospitals (such as Critical Access Hospitals) and for clinics that focus specifically on serving low-income patients (Federally Qualified Health Centers). The same is needed for major urban anchor hospitals.
Be diligent about enforcement.
Government must enforce existing rules and laws, such as the Emergency Medical Treatment and Labor Act (EMTALA) of 1986. EMTALA was passed in response to documented cases when some hospitals sent uninsured patients to public hospitals without providing any stabilizing care. EMTALA almost certainly helped to mitigate these practices, but dumping of patients persists to this day, and some observers have described declining federal enforcement of this statute. Strengthening the anchors requires that all parts of the health system do their share, play by the rules, and not shirk their responsibilities.
Anchor health systems occupy a unique, indispensable place in U.S. health care. Their challenges are many, far-reaching, and woefully underappreciated. Without these institutions working at their full potential, individuals, communities, and U.S. health care as a whole are jeopardized. These bedrock organizations cannot be allowed to wither. As the examples we have provided show, our recommendations are achievable. We hope that business, government, and the anchor health systems themselves will take necessary action now to apply them. Our nation’s collective health depends on it.
